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June 28, 2022 

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REAL WAGE: The inflation-adjusted purchasing power of the nominal wage. The real wage is commonly derived by dividing the nominal wage by the price level, indicates the physical quantities of goods and service that can be purchased with the nominal wage.

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AUTOMATIC STABILIZER: A feature of the federal government's budget that tends to reduce the ups and downs of the business cycle without the need for any special legislative action, that is stabilization policies. The two key automatic stabilizers are income taxes and transfer payments. When our economy drops into a recession, unemployment rises, aggregate output declines, and people have less income. But with less income, they pay fewer income taxes, and thus there's less of a drain on consumption than their might have been. Likewise, many who are unemployed get transfer payments in the form of unemployment compensation, welfare, or Social Security. This lets them consume more than they would have otherwise. During an expansion, both of these go in the other direction. As a result, a recession sees more spending and fewer taxes, while an expansion has less spending and more taxes, all occurring quite automatically.

     See also | business cycle | stabilization policies | fiscal policy | transfer payment | unemployment compensation | welfare | income tax | business cycle | contraction | expansion | consumption | income | aggregate output |


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PRODUCTION

The process of transforming the natural resources of the land into consumer satisfying consumption goods or productive capital goods. This transformation process involves the four scarce resources or factors of production--labor, capital, land, and entrepreneurship. Although production is generally the physical transformation of materials, it often involves the spatial relocation, or transportation, of commodities, as well.

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